Food and Beverage Management

Appraising Performance

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Performance appraisal

Revenue Costs Profits The product

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Fundamentals of appraisal

Knowing goals and objectives

Placing a value on a measurement

Being prepared to make decisions

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Basis of appraisal

Established aims and objectives

Existing budgets

Existing standards required

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Effect of changes in price and volume

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Spend per head and average check

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Key points of revenue appraisal Revenue is product of price and volume Appraisal needs to take account of changes in

both price and volume Averages not always accurate and prone to

misinterpretation Allow for inflation and/or price rises Need to compare like with like Incorporate 12-month rolling totals to

determine true trends and performance Revenue cannot be fully appraised by itself

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Appraising costs

Fixed costs

Variable costs

Semi-variable costs

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Change in costs and revenues

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Industry norms for cost percentages

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Key points of cost appraisal Structures vary, and change over time Can be measured in cash or percentages Proportional relationship between costs Relationship between costs and inflation Cross-sectional and time-series analyses useful 12-month rolling totals identify true performance Operators with the lowest costs perceived as

having a key advantage Allocating indirect costs more complex than

allocating direct costs

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Profitability measures

Gross profit Operating profit Net profit Net operating profit Departmental and unit profit Yield

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Example profit and loss account

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Comparison of gross profits

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Comparison of operating profits

* Costs will include ingredient costs and staff cost. The extent to which other costs have been included needs to be established

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Yield comparisons

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Relationship between revenue, costs and profits

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Comparison of GP in relation to revenue

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Comparison of cash GP and GP %

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Potential cash GP and GP %

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Effect of changed sales mix

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Sales mix example (beverages)

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Example of profitability calculations

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Popularity and profitability ranking

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Menu engineering matrix

Adapted from Kasavana and Smith 1999

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Menu engineering matrix

Adapted from Kasavana and Smith 1999

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Comparison of net operating profit measures

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Key points of profit appraisal Be clear how profit measures are contrived Compare like with like Appraise against objectives to give value Setting objectives includes subjective judgements Sales mix analysis determines real trends Profit percentages measure efficiency, not

profitability Cash contribution is what is being sought Comparison with industry norms us useful Use rolling 12-month totals to indicate true

performance Take account of stakeholders’ priorities

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Appraising the product

Approaches include: Measuring customer satisfaction Complaint monitoring Staff focus groups Mystery shopper Process reviews Quality audits Quality standards analysis

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Customer importance / operational achievement matrix

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Customer importance / operational achievement matrix

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Customer importance / operational capability matrix

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Customer importance / operational capability matrix

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Customer importance / staff importance matrix

© 2011 Cousins et al: Food and Beverage Management, 3rd edition, Goodfellows Publishers

Customer importance / staff importance matrix